STEVE INSKEEP, host:
Now, let's talk about a different kind of campaign.
Mortgage lenders are campaigning to recover their business. Scores of mortgage companies are going bankrupt, of course, because of high-risk loans. But many other are still trying to sell home loans. They're sending out junk mail and buying lots of TV and Internet and radio ads. Some say just what you might expect. But one company is taking an unusual approach - radio ads that bash the mortgage industry.
NPR's Chris Arnold reports.
CHRIS ARNOLD: Jon Shibley is not your average president of a financial company. He wears a cowboy hat and a leather jacket with western-style tassels - he's from Texas - and he has lots of western-themed stuff around his offices in Atlanta. And he's hit on an oddly effective way to sell mortgages.
(Soundbite of Lenox Financial radio ad)
Mr. JON SHIBLEY (President and CEO, Lenox Financial): When times are getting tough, banks want you to suffer - with higher payments…
ARNOLD: In his radio ad, Shibley likes to attack his own industry - holding forth on how lenders have been sticking it to their customers.
(Soundbite of Lenox Financial radio ad)
Mr. SHIBLEY: They ripped off so many people with bad adjustable mortgages. They made loans on bad appraisals. And now, they're going under because their loans are so bad people can't pay. Good, let them suffer, but you don't have to -because Lenox Financial is doing for free what these predators have been charging…
ARNOLD: Five years ago, Shibley had just 15 loan officers. Since then, he's built Lenox Financial into a company with 200 employees that originates $4 billion in loans annually. He's done that by aggressively advertising his no closing cost mortgages.
Like some other lenders, Shibley covers all the various fees that can add up to thousands of dollars when you get a loan. And with adjustable rate mortgages resetting sharply higher these days, Shibley has been telling people they should refinance into fixed rate loans.
Mr. SHIBLEY: Convert your loan to a fix, consolidate your line of credit and do it with no closing costs, rates get better, we'll lower your rate again with no closing costs - the biggest no-brainer on the history of earth.
Dr. SUSAN WOODWARD (Founder, Sand Hill Econometrics, Inc.): There's a lot of truth in that, but it's a truth that's more subtle than is revealed in the ad.
ARNOLD: Susan Woodward is an economist with Sand Hill Econometrics who studies the mortgage industry. She says lenders keep the cost of closing a loan a lot lower when they're paying for it instead of the customer.
Still, nothing's free. Woodward says borrowers often pay a slightly higher interest rates on these loans with no closing costs. But Woodward says they still come out ahead because it's so much easier to compare interest rates when you don't have to worry about lenders slipping in all kinds of fees.
Ms. WOODWARD: They save, you know, $1,200 to $1,500 per loan compared to other borrowers because they only have to look at one number.
Mr. SHIBLEY: (Unintelligible), how are you doing?
Unidentified Man #1: What's up?
Unidentified Man #2: How are you doing, buddy?
Mr. SHIBLEY: Good.
ARNOLD: John Shibley is checking in with a couple of his loan officers on his way back to his desk at the Lenox Financial headquarters in Atlanta.
Mr. SHIBLEY: The best thing that happened to me is that I never worked for another mortgage company.
ARNOLD: Shibley's first business was washing windows. He started a window-cleaning service in college and soon had 20 other students working for him. He sold that when he graduated and opened up a small mortgage business with a friend.
Mr. SHIBLEY: And I was kind of under the impression that you had an obligation to represent your client's interests, sort of like a, you know, like a lawyer, like a financial planner. I always thought you had some sort of fiduciary relationship to do a job for your customers and that was what eventually led me to no closing cost mortgages.
ARNOLD: Shibley has been very successful so far, but the entire industry right now is in trouble. Many people can't afford their adjustable rate loans that are jumping up by $500, $600, $800 a month and they get trapped if their loan is as big as the value of their house: They can't refinance. Banks won't touch them and the situation keeps getting worse.
Mr. SHIBLEY: Well, I'm nervous as hell. There's - you know, make no mistake about it. We're still doing well, but the problem is more and more people are calling and they're upside down in their mortgages and they just can't be helped. You know, I can make the phone ring. The problem is that everybody that's calling, you know, when they find out that they actually owe more than what their house is worth, it's like getting hit in the face with a bat.
ARNOLD: So Shibley continues his one-man auditory assault on the wrongdoings in the industry with his radio ads. In this one, Shibley says the lenders who are in trouble now deserve what they get, though he says that with more Texas flair.
(Soundbite of radio ad)
Mr. SHIBLEY: I believe what comes around in this world, goes around. If you harm a kid, somewhere down the line - this life or the next - somebody's going to work on you with a blowtorch and a drill. Mortgage companies and banks are going under left and right…
ARNOLD: Shibley says there's some good money to be made refinancing people out of the costly adjustable loans that they got themselves into. He says anybody whose rate is going to reset in the next few years should get into a fixed rate if they can because the housing crisis is far from over.
Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.
